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Life Healthcare shares shot up 2.45% in early trade on the JSE on Monday after the group said it expected its revenue to increase by between 16.5% and 18.5% in the six months to the end of March, largely because of the inclusion of Alliance Medical Group.

The healthcare group said it expected its revenue to rise by between R11.23 billion and R11.42 billion as a result.

Life Healthcare said it had used normalised earnings before interest, tax, depreciation and amortisation (Ebitda) as a primary measure to assess underlying financial performance.

“The group has performed to the board’s expectations, with the expected increase for the group’s normalised Ebitda being between 9.5% and 11.5% above the comparable period in 2017,” the group said.

In November 2016, Life Healthcare agreed to buy diagnostics specialist Alliance Medical for £800million (R13.64 billion), including debt, as the group expands into the UK market.

The company said its southern African operations were expected to increase revenue by between 8% and 10%, positively impacted by the higher volumes in the acute hospital division, with paid patient days (PPDs) increasing by 2% above last year’s figures.

Normalised Ebitda for the Southern Africa operations are expected to be between 5% and 6.5% compared to last year. The Ebitda margin is expected to be between 24.5% and 25.5% compared with last year’s 26%.

As a result, the share price increased to R29.71 a share, up from Friday’s closing price of R29 a share. However, it closed 1.72% at R29.50 at the close on Monday.

Life Healthcare is one of South Africa’s largest private hospital operators.

Growth

The Medical Alliance acquisition is expected to report revenue growth in the period.

“Alliance Medical showed good revenue growth of between 7% and 9% against the comparative six-month period, driven by solid growth in PET-CT volumes,” it said.

The group is trading under a cautionary and is still in discussions with Max India, the company’s joint venture partner in Max Healthcare Institute, to explore the possibility of Max India acquiring Life Healthcare’s equity interest in Max Healthcare Institute.

In Poland, revenue from the Scanmed operations is expected to increase by between 20% and 22% as a result of the business turnaround driven by the management team. The prior period included a downward adjustment to the over quota revenue of R17 million.

It said new four-year NFZ contracts covering 95% of the Scanmed business have been concluded at improved average pricing.

Normalised Ebitda for the Polish operations are expected to improve by more than 100%, on the back of continued integration and efficiency enhancements, the four-year NFZ contracts and the impact of the charge related to over quota correction in 2017.